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Trifax Corp. v. District of Columbia

June 15, 1999

TRIFAX CORP., PLAINTIFF,
v.
DISTRICT OF COLUMBIA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gladys Kessler, United States District Judge

MEMORANDUM OPINION

This matter comes before the Court upon Defendants' Motion to Dismiss [#12]. Plaintiff, Trifax Corporation, brings suit against the District of Columbia, various agencies of the District of Columbia, *fn1 and various District of Columbia officials in both their official and individual capacities, *fn2 alleging Constitutional and common law violations. Count I of Plaintiff's Complaint alleges a violation of Plaintiff's Constitutional right to due process. Plaintiff further alleges Count II for common law defamation and Count III for common law negligence. Upon consideration of Defendants' Motion, Plaintiff's Opposition, Defendants' Reply, and the entire record herein, for the reasons set forth below, Defendant's Motion to Dismiss is granted in part and denied in part.

I. Factual Background *fn3

Plaintiff, Trifax Corporation, a District of Columbia-based government contractor, provides health care and nursing services to residents of the District of Columbia and other jurisdictions. In April 1995, Plaintiff entered into a contract with the Department of Health ("DOH") to provide pre-natal care services. The contract specified a term of one year, with options for DOH to renew. In April 1997, DOH exercised its renewal option and extended the contract term to August 26, 1998.

In December 1996, Plaintiff entered into a separate contract with the District of Columbia General Hospital ("DCGH") to supply nurses and medical assistants to various clinics. That contract specified a one year term as well, with an option for DCGH to renew. In December 1997, DCGH extended the contract term to January 29, 1998. *fn4

In May 1997, the Office of the Inspector General ("OIG") initiated an investigation of Plaintiff's operations under its contracts with the District of Columbia, allegedly at the request of a District of Columbia Council Member. In November 1997, OIG released a report entitled "Review of the Department of Human Services and the District of Columbia General Hospital Contracts with the Trifax Corporation" ("OIG Report"). The OIG Report charged Plaintiff with various statutory and regulatory violations, as well as business improprieties, and ultimately recommended that Plaintiff be barred from competing for future contracts with the District of Columbia.

Plaintiff alleges that the OIG Report was both procedurally deficient and contained numerous erroneous factual findings. Specifically, Plaintiff alleges that the OIG failed to perform an "exit interview", and failed to provide Plaintiff an opportunity to review or comment on a draft of the OIG Report, as mandated by the Generally Accepted Government Audit Standards ("GAGAS") promulgated by the Comptroller General of the United States.

Plaintiff also alleges that officials within OIG specifically released a copy of the OIG Report to the Washington Post at the same time they released it to the public. The Post then relied upon the OIG Report to publish a critical and allegedly erroneous article about Trifax's operations on November 28, 1997. Other news agencies followed suit with similarly critical articles and news reports.

Plaintiff alleges that, as a direct result of the dissemination of the OIG Report, DCGH allowed its contract with Plaintiff to lapse on January 29, 1998, and declined to exercise its option to renew. Similarly, DOH requested that Plaintiff cease all operations with relation to its contract on August 25, 1998, one day prior to the expiration date of the contract. Another contract with the District of Columbia Health and Hospitals Public Benefit Corporation ("PBC") was terminated as of September 30, 1998.

Defendant Prettyman, former Inspector General for the District of Columbia, contacted Plaintiff by mail on March 20, 1998, and offered to issue a revised report upon submission of further documentation. Although Plaintiff submitted a letter with documentation of errors in the OIG Report, the OIG has, to date, not released a revised report.

Plaintiff first alleges that Defendants violated Plaintiff's right to due process by denying it the right to compete for contracts on a fair and equitable basis. Plaintiff further alleges that Defendants' publication of the erroneous OIG Report constitutes common law defamation. Finally, Plaintiff charges Defendants with common law negligence for issuing the OIG Report without regard for generally accepted auditing standards.

In the interest of clarity, the Court will distinguish between two classes of defendants. Although Plaintiff has not specifically designated two separate groups of defendants, it is readily apparent from the Complaint that two separate classes do indeed exist--a critical factor to consider in deciding which claims survive dismissal. One class is comprised of individuals involved in the preparation and dissemination of the OIG Report. That class ("Class I") properly includes the District of Columbia, the mayor, Defendant Prettyman, the OIG, Defendant Thomas, Defendant Brown, and Defendant Gaskins. The second class is comprised of individuals who allegedly violated Plaintiff's rights by improperly terminating or declining to renew existing contracts. This class ("Class II") also includes the District of Columbia and the mayor, as well as Defendant Kelly, Defendant Arrindell, Defendant Mileo, Defendant Williams, Defendant Oppedisano, Defendant Davis, Defendant Fite, Defendant Fairman, Defendant Wade, and their respective agencies.

II. Standard of Review

"[A] complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). As previously stated, the factual allegations of the complaint must be presumed true and liberally construed in favor of the plaintiff. Shear, 606 F.2d at 1253.

III. Analysis

A. Qualified Immunity of Individual Defendants

As a threshold issue, Defendants argue that those defendants sued in their individual capacities are entitled to qualified immunity on the due process claim, and that the Complaint must therefore be dismissed against them in their individual capacities.

Courts have long held that "government officials are entitled to some form of immunity from suits for damages. As recognized at common law, public officers require this protection to shield them from undue interference with their duties and from potentially disabling threats of liability." Harlow v. Fitzgerald, 457 U.S. 800, 806 (1982). *fn5 Faced with the countervailing concern that immunity offers a blanket protection for violating constitutional guarantees, however, the Supreme Court settled on the proposition that "government officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Id. at 818 (emphasis added)(citations omitted).

The Supreme Court later clarified its holding in Harlow in Anderson v. Creighton, 483 U.S. 635 (1987). Addressing the standard by which a government official's conduct must be evaluated, the Court wrote:

[T]he right the official is alleged to have violated must have been "clearly established" in a more particularized, and hence more relevant, sense: The contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right. This is not to say that an official action is protected by qualified immunity unless the very action in question has previously been held unlawful, but it is to say that in light of pre-existing law the unlawfulness must be apparent. Id. at 640 (citations omitted).

The Supreme Court recently reaffirmed its principles of qualified immunity in Crawford-El v. Britton, 118 S. Ct. 1584 (1998). Although its holding is not directly relevant to this case, *fn6 the Court set forth the procedure which lower courts should follow in considering a defense of qualified immunity. The Court directed that "if the defendant does plead the immunity defense, the district court should resolve that threshold question before permitting discovery. To do so, the court must determine whether, assuming the truth of the plaintiff's allegations, the official's conduct violated clearly established law." Id. at 1597 (citation omitted).

In the instant case, Plaintiff has sued seven agency officials in their individual capacities. With respect to these seven individuals, however, Plaintiff's Complaint is nearly devoid of any allegations of improper conduct. Plaintiff alleges simply that "[t]he conduct of Defendants Prettyman, Thomas, Brown and Gaskins in formulating and disseminating the OIG Report and in failing to issue a revised report, has caused and continues to cause quantifiable and unquantifiable injury to Trifax." Compl. at ¶59. The Complaint goes on to allege that the dissemination of the OIG Report, "all of which was caused both directly and proximately by the negligence or willful acts of Defendants Brown and Gaskins", led DCGH and DOH to decline renewal of their respective contracts. Compl. at ¶¶50, 51. Defendant Mileo is alleged to have issued a letter directing Trifax to cease operations on the DOH contract as of the date of expiration. Compl. at ¶51.

Plaintiff seeks to correct its pleading deficiency in its Opposition Brief, arguing that:

Defendants Brown and Gaskins -- issued an official OIG Report that falsely accused Trifax of engaging in a series of improprieties in violation of the law. . . . Because these Defendants disregarded such well established procedures for the proper preparation of an audit, their conduct thereby seriously stigmatized Trifax in a way that violated clearly established principles of due process. Pl.'s Mem. of Points and Authorities in Opp. to Mot. of Defs.' to Dismiss the Compl. Filed by Pl. Trifax Corp., at 20.

Even more conspicuous, however, is the complete lack of any allegations, other than their respective titles, with respect to Defendants Arrindell, Oppedisano, Davis, and Wade. Plaintiff simply states that "[t]hese violations have been compounded further by a cabal of D.C. Contracting Officers (the other individually sued defendants) who, without investigating Trifax, have improperly relied upon the false statements and conclusions of the OIG Report to thereby deny Trifax contracts to which it was otherwise entitled." Id. at 21.

The first step of the qualified immunity analysis is to determine whether the Defendants in this case performed discretionary functions within their line of duty. Here, it is beyond dispute that the OIG's investigation of Plaintiff falls within the category of "discretionary functions". Unlike "ministerial" functions, which accord a government agent no immunity, the investigation of government contractors and subsequent reporting of findings necessarily involve judgments "influenced by the decisionmaker's experiences, values, and emotions." Harlow, 457 U.S. at 816.

Similarly, Defendants Arrindell, Mileo, Oppedisano, Davis, and Wade, contracting agents for their respective agencies, performed "discretionary functions" in considering all appropriate information ...


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